AirAsia X Bhd., the long-haul arm of Asia’s biggest budget carrier, has started gauging investor interest for its $300 million Malaysian initial public offering.

The five-year-old airline plans to offer 790.1 million shares to raise between $250 million and $300 million, according to a term sheet obtained by Bloomberg News. The Sepang, Malaysia-based company intends to start trading on the Kuala Lumpur stock exchange on July 10, the document shows.

Proceeds will help finance new aircraft as AirAsia X takes delivery of seven Airbus SAS A330 planes this year, Chief Executive Officer Azran Osman-Rani said in March. The airline is expanding to fend off rising competition from Singapore Airlines Ltd.’s long-distance budget unit Scoot that started flying last year to tap the region’s rising air travel demand.

“The long-haul low-cost business needs time to be proven that it’s profitable,” said Angeline Chin, a Kuala Lumpur-based analyst at Alliance Research Sdn. “It also depends on how fast AirAsia X is adding new routes before Scoot. They also have to avoid cannibalization with AirAsia.”

This is the second of the three proposed listings by affiliates of Malaysia’s AirAsia Bhd. as the group raises funds to accelerate expansion. In December, it ordered 100 Airbus A320s valued at $9.4 billion, in addition to the 200 it had agreed in 2011 to purchase. The carrier is also adding a unit in India through a joint venture with Tata Group.

Affiliate Airlines

Asia Aviation Pcl, the parent of Thai AirAsia Co., was the group’s first affiliate airline to sell shares, debuting in Bangkok’s stock exchange last year. Its Indonesian unit will also go public in the third quarter, Group Chief Executive Officer Tony Fernandes said in February.

AirAsia rose 2.3 percent to 3.10 ringgit at the close in Kuala Lumpur trading, the highest price since Oct. 22. The stock has climbed 13 percent this year, compared with a 5.9 percent gain in the benchmark FTSE Bursa Malaysia KLCI Index.

Of the shares to be sold, 75 percent will be new stock and the remainder from three existing shareholders, the term sheet showed. CIMB Group Holdings Bhd., Malayan Banking Bhd., Credit Suisse Group AG and Morgan Stanley are joint global coordinators for the offering. Barclays Plc, BNP Paribas SA, Citigroup Inc., CLSA Ltd. and HSBC Holdings Plc are helping manage the offering, it said.

Malaysia Elections

AirAsia X, which has a fleet of 11 aircraft, first filed for the IPO in November. The carrier was weighing the timing for the fundraising to take into account the impact of Malaysia’s elections. Prime Minister Najib Razak’s ruling Barisan Nasional coalition returned to power at the May 5 polls.

Companies have raised $244 million via IPOs in Malaysia this year, compared with the $6.8 billion last year, according to data compiled by Bloomberg. Besides Air Asia X, Westports Malaysia Sdn. and UMW Holdings’ oil and gas unit are among firms that intend to have their IPOs this year.

Southeast Asian budget airlines may raise a combined $750 million from IPOs this year, Malayan Banking’s investment bank said in February. Discount carriers’ market share in the Asia- Pacific region rose to 24 percent last year from 1.1 percent in 2001, according to the CAPA Centre for Aviation, an industry consultant.

AirAsia X currently flies to 14 destinations in Asia, Australia and the Middle East, according to a prospectus filed this month with Malaysia’s Securities Commission. It plans to start services to South Korea’s Busan in July.

Last year, Scoot, a medium-haul budget airline fully owned by Singapore Air, started flying with Boeing Co. 777 aircraft. Singapore Air transferred its orders for the Boeing 787 Dreamliners to Scoot.

–Editors: Barry Porter, Vipin V. Nair

To contact the reporters on this story: Joyce Koh in Singapore at jkoh38@bloomberg.net; Fox Hu in Hong Kong at fhu7@bloomberg.net; Kyunghee Park in Singapore at kpark3@bloomberg.net

To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net